For this blog update, we will talk about the HomeReady Program and the advantages for First-Time home buyers. HomeReady is the program by Fannie Mae that serves as a very attractive package towards first time home buyers and repeat home buyers with low to moderate income. This program specifically targets low to moderate income borrowers, in that 620+ credit score range, who are looking to put down a minimum down payment. This program also allows “boarder” income, just like Freddie Mac’s Home Possible program, so this allows those who would be ineligible by themselves to supplement their income through occupants in their home.
- 1 Minute | No Hard Credit Check
Income Requirements for Fannie Mae’s HomeReady
As mentioned above, Fannie Mae’s HomeReady program is tailored towards the low to median income borrowers. This income is calculated also by the Area median income, or AMI, just like Freddie Mac’s Home Possible and Home Possible Advantage Programs. And just like those programs, the family and occupants of the new home can all count their income towards this amount. Supplemental Boarder income is the term used for occupants in the home whom either have their own income, or whom are paying rent to the borrower looking to own the home.
The Credit Factors
Credit-worthiness is more of a factor with Fannie Mae’s HomeReady program, versus Freddie Mac’s HomePossible program, which allowed those without a credit score to apply. The requirement for the HomeReady program is a score of 620, however there are perks for those that are above the 680 score, which leads to better pricing.
Another great perk for first time home buyers, is that the requirement for the down payment is only 3%. This also includes income from other sources like borrower down-payment assistance programs, employers, churches, etc. This 3% down-payment requirement is lower than the FHA program, which is 3.5%. As a first time home buyer, this is definitely one of the reasons people choose HomeReady and Home Possible programs over FHA. Additionally, this down-payment can completely be achieved without using personal funds. This is extremely attractive to those who may be gifted funds for the home purchase.
Another Advantage: Cancellable Mortgage Insurance
Fannie Mae’s HomeReady program, similar to Freddie Mac’s HomePossible program, allows for Cancellable Mortgage Insurance. Borrowers may have the option to cancel their mortgage insurance once their home equity reaches 20%. What this means is that the initial monthly payments will decrease at this point once the borrower stops having to be responsible for paying the Mortgage Insurance. As a reminder, for FHA programs, Mortgage Insurance is never cancellable, and is required for the entire life of the loan.
Lastly, Fannie Mae’s HomeReady program does allow for refinancing options. Refinancing may also help lower the monthly payments for a loan, but going for a refinance may also mean the borrower pays more in interest in the long run. This may be an attractive offer for first-time home buyers who first purchased the loan at a higher rate and wish to lower that rate, along with their monthly payments.
- 1 Minute | No Hard Credit Check
